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D.Y.CHANDRACHUD, AJAY RASTOGI
Managing Director Chhattisgarh State Co-Operative . . . Appellant Bank Maryadit – Appellant
Versus
Zila Sahkari Kendriya Bank Maryadit – Respondent
Key Points: - The Supreme Court held that Clauses (a) and (b) of Section 54(3) are special provisions for appointment of CEO in Cooperative Banks, allowing Bank appointment from RBI-eligible cadre while requiring compliance with RBI eligibility (!) (!) (!) - For Central Societies falling under Section 49-E(2), the CEO must be appointed from the cadre maintained under Section 54 if such a cadre exists, with State Government notifications guiding appointment from Apex cadre and panel forwarding by Apex Society (!) (!) (!) - The State Government can issue a Section 54(3) notification to designate class of societies to employ cadres from Apex/Central cadres, but cooperative banks get a carve-out for CEO appointment from their own cadre under special provisions (!) (!) - The 2016 Amendment inserted a RBI-eligibility criterion and Registrar appointment fallback if the bank fails to appoint within a specified period; these are to be harmonized with pre-existing 49-E(2) regulations, not to override them (!) (!) (!) - The Division Bench’s interpretation that Apex Body had no role was reversed; the Court held Apex/Cadre mechanism remains operative with CEO appointment from cadre and panel forwarding, ensuring regulatory control by the State Government over Central Societies with state funds (!) (!) - The case clarifies that the 54(3) framework excludes Cooperative Banks for broad delegation but provides a mechanism for Central Societies under 49-E(2) to appoint from cadre or via Registrar when Cadre is absent (!) (!) - The appeal is allowed; the appointment of the sixth respondent from the Apex cadre was validated; the seventh respondent’s appointment was set aside as not from cadre (!) - The Registrar’s ratification and BoD acceptance of the sixth respondent’s appointment were upheld under the applicable statutory scheme (!)
JUDGMENT :
Dr Dhananjaya Y Chandrachud, J.
This appeal has arisen from a judgment of a Division Bench of the High Court of Chhattisgarh dated 7 August 2018. Allowing a Letters Patent Appeal, the Division Bench set aside the judgment of a Single Judge dated 19 January 2018. The Division Bench held that the appointment made by the appellant on 11 August 2017 of the Chief Executive Officer ["CEO"] of the first respondent bank and its subsequent ratification by the Registrar of Cooperative Societies, were without the authority of law. Consequently, the decision of the appellant was held to be not binding on the first respondent.
2. The appellant - Chhattisgarh State Cooperative Bank - is the apex body of cooperative banks in the State of Chhattisgarh. The first respondent is a District Central Cooperative Bank which is governed by the provisions of the Chhattisgarh Co-Operative Societies Act I960 ["1960 Act"].
3. The CEO of the first respondent bank was arrested on 9 August 2017 by the Economic Offences Wing of the State of Chhattisgarh on charges of corruption, under the Prevention of
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